Thursday, October 18, 2012

20121018 1003 Global Commodities Related News.

Pro Framer: After the Bell Wheat Recap (CME)
Wheat futures enjoyed gains most of the day and rallied into the close to finish 3 to 8 1/2 cents higher in Chicago, roughly 8 to 11 cents higher in Kansas City and mostly 8 to 15 cents higher in Minneapolis. A late surge in the soybean market helped wheat to rally into the close. The market had enjoyed gains most of the day, thanks to sharp weakness in the U.S. dollar index and ideas demand for U.S. wheat will soon improve as global wheat stocks shrink.

Wheat Market Recap Report (CME)
December Wheat finished up 8 1/2 at 856 1/4, 1 3/4 off the high and 10 3/4 up from the low. March Wheat closed up 8 1/2 at 868 3/4. This was 10 3/4 up from the low and 1 3/4 off the high.
December Chicago wheat traded sharply higher on the day along with Kansas City wheat. Minneapolis wheat led all three markets higher after surging nearly 13 cents higher after yesterday's report that stated China bought 295,000 tonnes of Canadian Spring wheat. Some traders suggest the total volume could total 500-600,000 tonnes. Additional support came from continued dry weather in Australia and on outside markets as the US Dollar tumbled lower throughout the day. The US missed out on more Middle Eastern wheat business after it was announced that Algeria purchased 400,000 tonnes of option-origin wheat that is likely to come from Argentina or France. The missed business was another sign that US wheat remains overpriced relative to other origins around the world. The negative news was offset after ABARES estimated that Australian wheat stocks at the end of September fell to 7.1 million tonnes, which was down 2 million tonnes from August. The United Kingdom reported that they had exported only 26,800 tonnes of wheat in August and total United Kingdom exports for the 2012/13 crop year fell just shy of 70,000 tonnes vs. 281,704 for the same period last year. The prospects of a tightening global wheat supply and hope that US export demand will pick up later this year could suggest a positive long term outlook to prices.
December Oats closed up 3 1/4 at 395 3/4. This was 3 3/4 up from the low and 8 1/4 off the high.

Pro Farner: After the Bell Corn Recap (CME)
Corn futures closed mostly around 3 to 7 cents higher and near session highs. Much of the support for corn futures today came from pressure on the U.S. dollar. With the greenback nearing the September lows, there's a little more interest in the long side of the corn market. For corn to actively build on today's gains, however, some bullish demand news is likely needed.

Corn Market Recap for 10/17/2012 (CME)
December Corn finished up 7 1/4 at 745 1/2, 3/4 off the high and 9 1/4 up from the low. March Corn closed up 6 1/2 at 744 3/4. This was 8 1/4 up from the low and 3/4 off the high.
December corn traded higher into the close and near the highs of the day. The sharply lower dollar and higher trade in soybeans and wheat offered a positive tilt to the market. Basis in the interior of the US was steady throughout the day but bids on the river and in the Gulf of Mexico were lower due to a sluggish export pace. Corn futures saw a bit of sell pressure after ethanol production for the week ending October 12th averaged 797,000 barrels per day vs. 800,000 the week prior. Most in the trade expected a slight increase in production from the week prior so the numbers may come off as a disappointment. Total ethanol production for the week was 5.6 million barrels. Corn used in last week's production was estimated at 83.7 million bushels vs. 84 million last week. This crop year's cumulative corn used for ethanol production for this crop year is 508.3 million bushels. Corn use needs to average 86.5 million bushels per week to meet this crop year's USDA estimate of 4.5 billion bushels. December corn was able to trade above yesterday's high briefly at the close which could be considered a short term positive for the market.
November Rice finished up 0.265 at 15.135, 0.055 off the high and 0.045 up from the low.

Grains Climb as Dry Australian Weather Adds to Concerns (Bloomberg)
Wheat rose in Chicago as dry weather in Australia added to global supply concerns after the worst U.S. drought in half a century parched crops. Corn gained. Wheat reserves in Australia, the second-largest exporter, fell 14 percent from a year earlier at the marketing season’s end on Sept. 30, the government said today. It expects production of the grain to drop to 22.5 million metric tons this year from the prior period’s record. Western Australia will remain dry in the next seven days, increasing risks of winter- crop damage, Telvent DTN Inc. said today. “The dry weather in Australia is still a concern,” Victor Thianpiriya, an agricultural commodity analyst at Australia & New Zealand Banking Group Ltd. (ANZ), said by phone from Singapore. Wheat for December delivery advanced 0.5 percent to $8.5225 a bushel by 6:56 a.m. on the Chicago Board of Trade. Prices slid 4.3 percent in the previous three days. In Paris, milling wheat for November delivery rose 0.2 percent to 258 euros ($339) a ton on NYSE Liffe.
Algeria issued a tender to buy 50,000 tons of wheat, which “held European wheat prices steady” before the results, French farm adviser Offre & Demande Agricole wrote in an e-mailed comment. “French wheat is in a good position and Algeria usually buys much more than it initially sets out to buy.” Corn for delivery in December rose 0.6 percent to $7.4275 a bushel in Chicago. The grain has dropped 13 percent since concerns about the U.S. drought lifted prices to a record $8.49 a bushel on Aug. 10.

Corn States Lead Record Crop-Loss Payout: BGOV Barometer (Bloomberg)
The worst U.S. drought since the 1950s may trigger record crop insurance payouts, concentrated in corn-producing states led by Illinois, Indiana and Missouri. Industry payouts from companies including Ace Ltd. (ACE), American Financial Group Inc. (AFG) and Wells Fargo & Co. (WFC) may reach a record $25 billion this year, according to Kansas State University. The BGOV Barometer shows where insured losses may be the biggest based on declines in corn production. Corn yields, measured in bushels per acre, dropped by more than a third from the average of the previous five years in Missouri, Illinois and Indiana, and the U.S. Department of Agriculture this month projected yields nationwide may decline to a 17-year low of 122 bushels an acre.
The drought pushed the price of corn, the nation’s most valuable crop, to a record $8.49 a bushel in August, further driving up insurance payouts. Many crop insurance payments cover revenues based both on the magnitude of lost yields and the price of the crop at harvest. Corn futures for December delivery traded in Chicago closed up 1 percent at $7.455 a bushel today. Farmers can choose to protect up to 85 percent of revenue with insurance, and “the coverage in most of the central Midwest states runs a little higher than the U.S. averages,” Keith Collins, a former Agriculture Department chief economist who now works with National Crop Insurance Services, said in an e-mail. Of 96.9 million acres planted to corn, 67.2 million were covered by revenue protection, Collins said.

Oil Trades Near One-Week High on Demand Outlook Amid Supply Gain (Bloomberg)
Oil traded near the highest level in a week in New York amid signs of an economic recovery in the U.S., the world’s biggest crude consumer. Futures were little changed after rising 3 cents yesterday. Housing starts in the U.S. surged 15 percent last month to the highest in four years, exceeding all forecasts in a Bloomberg survey of economists, Commerce Department data showed. Petroleum demand climbed the most in two months last week, the Energy Department said in a report. Oil pared gains after the report also showed crude stockpiles advanced to the highest level for this time of year since government records began in 1982. “We are seeing the green shoots of recovery starting to come through in the U.S.,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “I’m quite optimistic and I think you should see demand start to pick-up.”
Crude for November delivery was at $91.96 a barrel, down 16 cents, in electronic trading on the New York Mercantile Exchange at 12:09 p.m. Sydney time. The contract yesterday closed at $92.12, the highest settlement since Oct. 9. Prices changed less than 25 cents for a fourth consecutive day, the longest streak of moves that small since 2003. Oil is down 7 percent this year. Brent oil for December settlement slid 10 cents to $113.12 a barrel on the London-based ICE Futures Europe. The front-month European benchmark grade’s premium to the corresponding West Texas Intermediate contract was at $20.71 a barrel. It settled at $23.95 on Oct. 15, the widest gap since reaching a record on Oct. 14, 2011.

Recap Energy Market Report (CME)
November crude oil price broke out to a new four day high during the morning hours but finished the session fractionally higher. Early support in the crude oil market came from a sell off in the US dollar, improvement in risk-taking sentiment and favorable US economic data. However, the upside action in the crude oil complex seemed limited on ideas of slowing global growth, as well as apprehension ahead of Chinese Q3 GDP data this evening. November crude oil prices reversed course after this morning's EIA inventory report that showed a much larger than expected build of 2.860 million barrels. The refinery operating rate was up 0.7% to 87.4%. Meanwhile, further upside action in US equity markets lent the crude oil market a measure of support.

EIA inventory report mixed By Dominick Chirichella - Wed 17 Oct 2012 12:29:30 CT (CME)
The improvement in the latest housing data out of the US today coupled with Spain maintaining its investment grade bond rating was enough to offset the build in US crude oil inventories and minimize the decline in oil prices today. In fact it was a relatively flat day for most risk asset markets including the US equity market. In fact I believe we are starting to enter what I like to call the "election zone" when many participants will likely start to neutralize their trading books a tad as the uncertainly over who will win the US Presidential election as well as how the markets will react to a win by either side is quickly increasing. There is now just three weeks to go before election day and at the moment the Gallup national poll has Mitt Romney ahead of Barrack Obama by 6 points. That said in terms of elections three weeks is a long time to go and lots can happen between now and November 6th. As such I believe many market participants will take a cautious approach to most risk asset markets and likely keep their trading time horizon relatively short term until after the election.
Tonight key data will be coming out of China... GDP, Industrial Production, Retail Sales, House prices and Fixed Asset Investment. Each data point is very important in assessing the state of the Chinese economy and will likely impact the direction of oil and the broader risk asst markets for the next several days. The market is expecting GDP to come in at 7.4%, Industrial production at 9%, Sales at 13.2% and Asset Investments at 20.2%. If the actual data is in sync with the projections it would signal that the Chinese economy may be starting to stabilize and possibly be setting up for a turn back to the upside. China's Premier Wen Jiabao said today that the country's economic situation last quarter was relatively good. Possibly eh is signaling that the GDP data may come in even better than expected. Either way this batch of data will be a market mover for tomorrow's trading.
For the second day in a row global equity markets rose across the board as shown in the EMI Global Equity Index table below. The Index is now up by 2.1% for the week resulting in the year to date gain widening to 8.8% orthe highest level since mid September. Five of the bourses are showing double digit gains for 2012 with China still the only bourse in the Index that is still in negative territory for the year. Global equities have been a positive price driver for the oil complex as well as the broader commodity markets.
Wednesday's EIA inventory report was mixed but slightly bullish overall as total commercial stocks declined on the week. Overall I would categorize the report as mildly biased to the bullish side as total commercial stocks decreased modestly even as crude oil inventories increased as crude oil imports rose on the week. Refinery utilization rates increased on the week up to 87.4% of capacity. The data is summarized in the following table along with a comparison to last year and the five year average for the same week.
Total commercial stocks of crude oil and refined products decreased by 2.7 million barrels after decreasing by about 4.3 million barrels the week before. The year over year surplus came in at 32.1 million barrels while the surplus versus the five year average for the same week narrowed to 34.3 million barrels.
Crude oil inventories increased (by 2.9 million barrels) and above the market expectations. Crude oil inventories have been increasing steadily for most of this year and are still well above the levels they were at during the height of the recession as well as being at the highest level since 1990. With the increase in stocks this week the crude oil inventory status versus last year is still showing a surplus of around 36.3 million barrels while the surplus versus the five year average for the same week came in around 37 million barrels. Crude oil imports increased modestly on the week.
PADD 2 crude oil inventories increased by about 1.2 million barrels while Cushing, Ok crude oil inventories increased by about 0.1 million barrels on the week. Crude oil inventories in the mid-west region of the US are off of their record high levels as the Seaway pipeline is now pumping oil out of the region as well as refineries running at over 90% of capacity (temporarily lower from Isaac). The increase in crude oil inventories in both PADD 2 and only small decline in Cushing is bullish for the Brent/WTI spread. The Nov spread is trading around the $20.60/bbl level.
Distillate stocks surprisingly decreased (versus and expectation for a smaller decline) even as refinery run rates increased by 0.7%. Heating oil/diesel stocks decreased by 2.2 million barrels after declining by 3.2 million barrels in the previous week. The year over year deficit came in around 31.1 million barrels while the five year average remained in a deficit of about 31.6 million barrels.
Gasoline inventories increased versus an expectations for a small build. Total gasoline stocks increased by about 1.7 million barrels on the week versus an expectation for a smaller build. The deficit versus last year came in at 9.1 million barrels while the deficit versus the five year average for the same week was about 7.5 million barrels.
The following table details the week to week changes for each of the major oil commodities at every level of the supply chain. As shown I have presented a mixed categorization on the week as crude oil and gasoline were bearish while distillate and jet were bullish. Overall this week's report was biased to the bullish side as total stocks are once again back to declining.
The oil complex has breached all of its current support levels and as such I am keeping my view at neutral for today as crude oil continues to trade within a wide trading range (see above for more comments). The battle continues between the negativity from the slowing of the global economy compared to what global stimulus programs might do to the economy going forward while geopolitics has continued to remain an issue for market participants.
I am keeping my Nat Gas price view at neutral with bias to the bullish side as the fundamentals and technicals are quickly catching up the current price levels. As I mentioned above the market appears to be moving into a buy the dip mode
This week the EIA will release the weekly Nat Gas inventory report on its normal schedule... Thursday October 18 at 10:30 AM. This week I am projecting a 55 BCF net injection into inventory. My projection for this week is shown in the following table and is based on a week that experienced minimal Nat Gas cooling related demand but a fair amount of heating related demand from the cold front that has passed across the upper mid west and along parts of the east coast My projection compares to last year's net injection of 106 BCF and the normal five year net injection for the same week of 71 BCF. Bottom line the inventory surplus will narrow modestly this week versus last year and versus the five year average if the actual numbers are in sync with my projections. This week's injection will be at 52% of last year and 77% of the five year average for the same week if the actual outcome is in sync with my forecast. For interest the average for the injection season to date has been around 71.5% of last year.
If the actual EIA data is in line with my projections the year over year surplus will narrow to around 219 BCF. The surplus versus the five year average for the same week will widen to around 252 BCF. This will be another bullish weekly fundamental snapshot if the actual data is in line with my projection. The early industry projections are coming in a wide range of the 30 BCF to the 70 BCF with the consensus starting to form around 50 BCF.

Vale 3Q Iron-Ore Output Falls Less Than Forecast to 83.9m (Bloomberg)
Vale SA (VALE3)’s third-quarter iron-ore production fell 4.6 percent, beating analysts’ estimates, as the world’s biggest producer of the steel-making ingredient faces weaker demand in China and Europe, its two main markets. Output declined to 83.9 million metric tons from a record 87.9 million tons a year ago, the Rio de Janeiro-based company said in a regulatory filing today. That exceeded the 82.8- million ton average of seven analysts’ estimates compiled by Bloomberg News. BHP Billiton Ltd. (BHP)’s quarterly iron-ore output was little changed, while Rio Tinto Group’s gained 6 percent. Vale this year suspended projects, announced asset sales for about $1.2 billion and cut output of premium pellet products as demand slows in China, the biggest buyer of iron ore, and growth slows in Europe, its second-biggest market. Brazilian iron-ore exports slumped 8.2 percent in the three months through Sept. 30, its biggest quarterly decline compared to the prior year in more than three years.
Vale, the world’s third-largest mining company by market value after Melbourne-based BHP and Rio Tinto (RIO), gained 1.4 percent to 36.33 reais at the close in Sao Paulo today. The stock has dropped 3.9 percent this year, underperforming the Brazilian benchmark Bovespa index, which rose 5.9 percent in the period. Rio Tinto overtook Vale to become the world’s second- most valuable mining company for the first time since 2008, according to today’s closing prices of New York-listed shares.

Silver Market Recap Report(CME)
Silver prices were able to shake off early pressure but continued to lag behind other metal markets by only posting moderate gains during today's trading, as prices remain in close proximity to Monday's 5-week lows. Some traders felt that the sense of improving global risk sentiment clearly helped December silver extend this week's recovery. Other traders noted that relatively low US inflation levels may be to blame for silver's losses of more than $1.25 during the month of October.

Gold Market Recap Report(CME)
The gold market was able to recover from early pressure and ended up posting moderate gains by the close of Wednesday's trading. Many in the market feel that macro-economic sentiment continues to improve, which has led to rising investment demand for gold during the early part of this week. A rebound in global risk sentiment was strengthened by better than expected US Housing data earlier in the day, as well as from rising optimism that Spain is close to making a formal request for aid. A sharp selloff in the Dollar down to a new 1-month low was also seen by many traders as a key positive factor for gold prices during today's session.

Gold Set to Decline for First Day in Three Before Chinese Data (Bloomberg)
Gold was poised to drop for the first time in three days before a report forecast to show growth in China slowed for a seventh quarter, curbing demand for commodities. Silver fell. Spot gold was little changed at $1,748.55 an ounce at 9:13 a.m. in Singapore, after advancing 0.7 percent in the past two days. The metal for December delivery slid 0.2 percent to $1,749.70 an ounce on the Comex in New York. China’s gross domestic product probably expanded 7.4 percent in the July-September period from a year earlier, economists in a Bloomberg News survey estimated. The country’s economic growth has started to stabilize, the official Xinhua News Agency reported yesterday, citing Premier Wen Jiabao. “Slowing demand concerns will continue to be of focus, with attention particularly on China’s GDP,” Australia & New Zealand Banking Group Ltd. analysts led by Mark Pervan wrote in a report today. “Prices expected to experience more volatility and possibly decline towards $1,735 if data disappoints.”
Holdings in exchange-traded products rose for the first day in four yesterday to 2,579.062 metric tons after expanding to a record 2,582.98 tons on Oct. 11, data compiled by Bloomberg show. Spot gold of 99.99 percent purity was little changed at 352.51 yuan a gram ($1,752.83) on the Shanghai Gold Exchange. Volumes slipped to 3,759 kilograms yesterday from 4,686 kilograms on Oct. 16. Cash silver fell for the first day in three, dropping as much as 0.4 percent to $33.0875 an ounce, before trading at $33.10. Spot platinum gained 0.2 percent to $1,668 an ounce, climbing for a third day, and palladium was little changed at $652.50 an ounce.

Gold Futures Rise on Investment Demand as Dollar Drops (Bloomberg)
Gold futures rose for the second straight day as the dollar’s decline spurred demand for the metal as an alternative investment. The greenback fell to a four-week low against a basket of major currencies after Spain kept its investment grade credit rating from Moody’s Investors Service, easing European fiscal concerns. Yesterday, gold climbed 0.5 percent as the dollar fell 0.4 percent. “The weaker dollar is lending support to gold,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. Gold futures for December delivery climbed 0.4 percent to settle at $1,753 an ounce at 1:52 p.m. on the Comex in New York. The price has increased 12 percent this year. Silver futures for December delivery rose 0.8 percent to $33.232 an ounce, extending this year’s gain to 19 percent.
On the New York Mercantile Exchange, platinum futures for January delivery advanced 1.5 percent to $1,670.50 an ounce. Palladium futures for December delivery surged 2.3 percent to $653.40 an ounce, the biggest jump for a most-active contract since Oct. 4.

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